Build granny flat or duplex?

New to the forum and IP arena and seeking advice/help from experienced investors here.

Recently bought an old house on a 700sqm land - close to station - in Blacktown LGA - cost $700k.
Zoning - 2(a) - RESIDENTIAL 'A' CLAUSE 48 - which allows for dual occupancy.

I knew subdivision of the land was not possible.
And the idea was to knock down and build a duplex with a view to rent out in the short term and sell one or both at a later stage.

Much to my surprise (and shock!!!) came to know that one cannot sell the duplex individually.

Rookie mistake? or have others gone through similar realizations?
I know few people have lamented about the ways of Blacktown council on allowing to build duplex but not to sell individually !!!

Currently rented to a relative for $450/pw and heavily -ve geared at the moment.

So, the dilemma is whether to put a granny flat - I hear the cost around $120k?
Conservative estimate of rent for GF - $300-350/pw - which should make the property pretty much neutral or even a little +ve.

Or still go ahead with buildng the 3 or 4 b/r duplex - cost around 550-600k?
Rent for both duplex - 1100-1200/pw.
Could still be -ve geared but better than current position.

Or just leave it as it is.
I can sustain the -ve outgoing for the time being but not for long (1-2 yrs max).
And wait to see if the council comes around to allow strata subdivision and build the duplex then - which would be more attractive financially.

So, to make the best use of the land - for now and future, what would you guys do?
 
Oh dear... You're going to be in a world of hurt when rates tick up and prices flat line...

I am inclined to say granny flat just because it will at least get you neutral. Either way you cant sell individually so may as well go the cheaper option.

But still...woah.

Another option would be to hold it and flick it in 6 months...
 
G
...I knew subdivision of the land was not possible.
And the idea was to knock down and build a duplex with a view to rent out in the short term and sell one or both at a later stage.

Much to my surprise (and shock!!!) came to know that one cannot sell the duplex individually.

If you knew you couldn't subdivide, how did you think you'd be able to split the duplexes and sell separately?
 
One concern dual occ is valuation on completion. you will spend $1.3m total for the land and build, and unlikely valuation to come to that figure. If valuation arrives $1m and bank allows you to borrow 80%, do you have the cash to cover the short fall?

instead of granny flat option, are there option to leave existing dwelling and build new dwelling attached to existing dwelling and get this approved as dual occ. Say build a single story vila type 120m2 cost around $200k.
requirement such as car space, private open space, storm water would be your biggest concern to go with this option. This option if approved give you option for income, lower entry and if in near future if Blacktown allows strata title dual occ you're likely meet the requirement.
 
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Fortunately for some of us, and unfortunate for those buying now - Sydney has moved significantly over the last two years. Buying a block, and putting on a granny flat would have been good a few years ago.

I don't see a point of putting on the granny flat just for the sake of making the property neutral. With a granny flat on, you will be behind anyway - as I understand, it doesn't really add that much value to the over property.

Personally, I would just leave as is.

May be wait for 6 to 12 months and see if you still feel the need to put on a granny flat.
 
I don't understand why you can build a dual occupancy but can't strata subdivide it and sell off individually. Am I missing something here?? This seems very strange. I have been doing this for years in my shire. I understand that you may not be able to do a full subdivision but why can't you strata a dual occ?
 
I don't understand why you can build a dual occupancy but can't strata subdivide it and sell off individually. Am I missing something here?? This seems very strange. I have been doing this for years in my shire. I understand that you may not be able to do a full subdivision but why can't you strata a dual occ?

Strange it sounds, but Blacktown council is one of few council that has this rigid planning rules.
Strata title a dual occupancy/duplex is a form of subdivision, but Blacktown council will not allow allow strata or community title the complete product.
Previously you can build vila/townhouse (which is strata titled) at any zoning as long as you met the lot requirement. The proposed zoning, need to be at a R3 with minimum lot size.
Proposed R2 zoning allows dual occ/duplex but it can only be in one title, cant strata title.
 
There is one way you can do a dual occupancy and sell separately. You build under one title but then turn it into a company and sell it as shares. Not very appealing to buyers but it is one way of doing it.

I think 700k for Blacktown is a bit higher end. Keep it for now and rent it. At least use it as a negatively geared property to lower your taxable income. If market keeps going up then clean it up and sell it. I believe your stamp duty and agent fee will be tax deductible if it is an investment.
 
Why would anyone buy a duplex for 550-600k in blacktown when they can buy a new house on a 300sqm block for 550-600 in Riverstone, Schofields, Marsden park?

The only suggestion I could honestly give you is to get a flatpack home for 20k or get a cheap relocatable home for 15-20k on gumtree and use it as a granny flat.. It counts as $0 for bank valuation but who cares if you're getting the rent.. Does need a DA approval though. Granny flats are a rip off these days.. Metricon builds 3 bedroom brick homes for 120k.. I also did hear about a shed company that does granny flats inside sheds and costs about 20k. I think they were called bestsheds
 
Blacktown town planners are busy approving about 10,000 lots of land I can't see them changing zoning anytime soon to allow that..Where did you buy in Blacktown? Lalor Park side, Marayong side or Arndell Park side?
 
Why would anyone buy a duplex for 550-600k in blacktown when they can buy a new house on a 300sqm block for 550-600 in Riverstone, Schofields, Marsden park

The only suggestion I could honestly give you is to get a flatpack home for 20k or get a cheap relocatable home for 15-20k on gumtree and use it as a granny flat.. It counts as $0 for bank valuation but who cares if you're getting the rent.. Does need a DA approval though. Granny flats are a rip off these days.. Metricon builds 3 bedroom brick homes for 120k.. I also did hear about a shed company that does granny flats inside sheds and costs about 20k. I think they were called bestsheds

So much false in this post...

1: You can barely build a 60m2 shed for 15-20k let alone a fitted out granny flat.

2: You cant just plonk a relocatable home on your block and get it approved as a granny flat.

3: A 120k 3 bed home (19 square?) from metricon would basically be just a shell. You need to double that figure before it is complete.
 
So much false in this post...

1: You can barely build a 60m2 shed for 15-20k let alone a fitted out granny flat.

2: You cant just plonk a relocatable home on your block and get it approved as a granny flat.

3: A 120k 3 bed home (19 square?) from metricon would basically be just a shell. You need to double that figure before it is complete.

1. Go to the bestsheds website and look up granny flats. It'll still work out cheaper than a 120k granny flat..

2. If it's under 60sqm why not?

3. Went through the prices with Metricon. All together will cost about 150k. Its a shell on a budget.. It was some special deal they had about 3 months ago. Dont know if that still exists though. Granny flats are now 120k for a demountable looking building.
 
1: Seen it, the price is for a colourbond shell, some doors and windows. Everything else 50-70k easy.

2: Doesn't meet requirements of the sepp, basix and likely the currect building code. You severly underestimate site costs too.

3: The Metricon home must have been really really small then. I like how you are slowly drip feeding us with more info too, we're up to 150k now and im guessing they didnt even do a proper tender and didnt go through selection with you. They could only guess site costs too.

Im up to my 3rd granny flat. Smallest i built is 73m2 @ 100k and largest at 90m2 cost 116k. I recokon if i was just sluming it and went for 60m2 I could do even better. What do you think? :cool:

Those are not demountable sheds either. Concrete slab, clad and internals to a mid range finish.
 
I don't think you will be able to do a single dwelling house for even $150k turnkey.

I think you need to be very careful when project builders (or any builder for that matter) gives you a price because it never includes everything.

I went through so many revisions with my builder recently that we almost started to run out of letters and numbers.
 
1: Seen it, the price is for a colourbond shell, some doors and windows. Everything else 50-70k easy.

2: Doesn't meet requirements of the sepp, basix and likely the currect building code. You severly underestimate site costs too.

3: The Metricon home must have been really really small then. I like how you are slowly drip feeding us with more info too, we're up to 150k now and im guessing they didnt even do a proper tender and didnt go through selection with you. They could only guess site costs too.

Im up to my 3rd granny flat. Smallest i built is 73m2 @ 100k and largest at 90m2 cost 116k. I recokon if i was just sluming it and went for 60m2 I could do even better. What do you think? :cool:

Re the 90sqm GF - did you do a sneaky castro and did an attached shed?
 
1: Seen it, the price is for a colourbond shell, some doors and windows. Everything else 50-70k easy.

2: Doesn't meet requirements of the sepp, basix and likely the currect building code. You severly underestimate site costs too.

3: The Metricon home must have been really really small then. I like how you are slowly drip feeding us with more info too, we're up to 150k now and im guessing they didnt even do a proper tender and didnt go through selection with you. They could only guess site costs too.

Im up to my 3rd granny flat. Smallest i built is 73m2 @ 100k and largest at 90m2 cost 116k. I recokon if i was just sluming it and went for 60m2 I could do even better. What do you think? :cool:

Those are not demountable sheds either. Concrete slab, clad and internals to a mid range finish.

You seem to be wasting your breath, Biz. :(
 
New to the forum and IP arena and seeking advice/help from experienced investors here.

Recently bought an old house on a 700sqm land - close to station - in Blacktown LGA - cost $700k.
Zoning - 2(a) - RESIDENTIAL 'A' CLAUSE 48 - which allows for dual occupancy.

I knew subdivision of the land was not possible.
And the idea was to knock down and build a duplex with a view to rent out in the short term and sell one or both at a later stage.

Much to my surprise (and shock!!!) came to know that one cannot sell the duplex individually.

Rookie mistake? or have others gone through similar realizations?
I know few people have lamented about the ways of Blacktown council on allowing to build duplex but not to sell individually !!!

Currently rented to a relative for $450/pw and heavily -ve geared at the moment.

So, the dilemma is whether to put a granny flat - I hear the cost around $120k?
Conservative estimate of rent for GF - $300-350/pw - which should make the property pretty much neutral or even a little +ve.

Or still go ahead with buildng the 3 or 4 b/r duplex - cost around 550-600k?
Rent for both duplex - 1100-1200/pw.
Could still be -ve geared but better than current position.

Or just leave it as it is.
I can sustain the -ve outgoing for the time being but not for long (1-2 yrs max).
And wait to see if the council comes around to allow strata subdivision and build the duplex then - which would be more attractive financially.

So, to make the best use of the land - for now and future, what would you guys do?

I was in the same situation in late 2009, only difference was that i bought the place in 2003 years before that (that said, prices in that area remain pretty much stagnant during 2003-2008, between 2008-2009 maybe 10% in that year).

Initially I wanted to build a house at the back of an existing block (something I wanted to do when i bought in 2003), council said no. The only way was to knock down the existing house and build a duplex.

I ran the numbers, and came up with the following conclusion:
1. Do nothing = Negative Cash flow
2. Knockdown build duplex = Negative cash flow (surprisingly the same cash flow position as option #1)
3. Build Granny Flat = Positive cash flow.

I went with Option #3 as it gave me better cash flow which would allow me to comfortably buy another property.... which is what i did. It was a great decision at the time and it probably still was.

I often wondered the what if scenarios of #1 and #2. Here is how i imagine they would play out.

Scenario #1 - Do nothing in 2009
I would have most likely sat on it for until 2012 (combined employment income with wife was at a happy level then) and then decided to put a duplex on it at a cost of $600k. That would have taken close to 1.5 years between approvals and construction.

The latest bank valuation for the place with the granny flat came in at $1.05m (though if i put it on the open market it would fetch $1.25m in this current market). Im guessing with the duplex the bank would give me $1.6m (assuming i could sell them off individually - it would be lower if they had to be sold together) as a valuation. Open market would be around 1.7m

Having bought this place for $500k in 2003, the figures would potentially look like
Duplex: 500k Purchase + 600k build = $1.1m. Value @ $1.6 = $500k equity
vs
GF: 500k Purchase + $130k build = 630k. Value @ 1.05 = $420k equity

Downside is that I would still be cash flow negative. So wifey would not allow any further purchases.

Option #2 - Build Duplex in 2009
Assuming build costs were the same (which may have been the case), I would probably have $500k equity today and still be negatively geared.

Assuming the build was completed in 2011, the valuation probably would have come back at 1.2m at best.
Duplex: 500k Purchase + 600k build = $1.1m. Value @ $1.2 (2011) = $100k equity
vs
GF: 500k Purchase + 130k build = $630k. Value @ $680k (2011) = $50k equity

Similar story, it would remain negatively geared, so wifey wouldn't allow next purchase.

Now in both Scenario 1&2, it appears i would have greater equity at my disposal. However the biggest issue would have been cashflow. What good is equity if you can't release it?

Because of the increased cash flow, me and my wife were happy to make a decision to buy another property and repeat the process. That newer IP has made us approx $300k in equity and was positively geared from the beginning.

TL;DR

Duplex: $500k equity, negatively geared, no further puchases.
GF: 720 equity (because it enabled me to buy another IP), positively geared
 
1: Seen it, the price is for a colourbond shell, some doors and windows. Everything else 50-70k easy.

2: Doesn't meet requirements of the sepp, basix and likely the currect building code. You severly underestimate site costs too.

3: The Metricon home must have been really really small then. I like how you are slowly drip feeding us with more info too, we're up to 150k now and im guessing they didnt even do a proper tender and didnt go through selection with you. They could only guess site costs too.

Im up to my 3rd granny flat. Smallest i built is 73m2 @ 100k and largest at 90m2 cost 116k. I recokon if i was just sluming it and went for 60m2 I could do even better. What do you think? :cool:

Those are not demountable sheds either. Concrete slab, clad and internals to a mid range finish.

Were they in NSW? Isnt the legal limit 60m2? Who was your builder? What happens if the tenants get injured in your extra shed to make it 90m2? Does your insurance cover it?

You're probably right regarding the other points. Happy to learn. Correct about the pricing metricon gave me and yes the house was tiny. In saying that, my mate just got a quote back for a full turnkey allworth homes 4 bedder in Jordan Springs for 187k.

Back to the main guy, what's the point of doing a duplex if you can't have two titles?
 
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